Author of three books. This blog not very active so follow on Twitter: @gary_weiss

Monday, January 25, 2010

More Fallout From Big Money Article: Overstock.com ex-CFO Quits

More fallout from The Big Money's devastating article on the corporate crime petri dish, Overstock.com: the official in charge of the company's nonexistent internal controls, a disaster area exposed in the article, is out on his rump.

The company issued an 8-K today, at the edge of the time allowed by law, announcing that ex-CFO David Chidester departed the day after the article appeared:

On January 20, 2010 Mr. David K. Chidester left by mutual agreement, effective immediately, from his position as Senior Vice President, Internal Reporting and Information, of Overstock.com, Inc.

In the article, ace financial writer Roddy Boyd pointed out that the company basically didn't have internal controls.

The Big Money has obtained documents showing that in the months after Overstock filed its lawsuit, a series of mishaps surrounding its bungled inventory-management software upgrade pushed it into some dire financial straits. The crux of the problem—which had been building for several months while Byrne railed against short-sellers and sundry business reporters—was that since Overstock’s software system couldn’t track its inventory well, its accounting staff had trouble deciphering how much it owed and whom it had to pay. [Emphasis added]

Note the last sentence. That little detail--not knowing what was going on--didn't prevent Overstock's Creep Executive Officer, Patrick Byrne, from putting his John Hancock alongside Chidester's on Sarbanes-Oxley-required certifications attesting to the soundness of its internal controls. Chidester was CFO during that time.

Overstock restricted itself to that one-line 8-K. No customary press release saying what a terrific, competent guy just vamoosed.

In addition to signing false Sarbanes-Oxley certifications, Chidester made false claims to investors about Overstock.com's compliance with SEC Regulation G, governing non-GAAP financial measures, as I will describe in more detail later in this blog post.

The term "mutual agreement" usually means that the company does not want David Chidester around to answer your questions and Chidester does not want to be readily available to respond to your inquires. After all, David Chidester knows where the "black holes" are to be found in Overstock.com's financial reporting irregularities.

It also could mean that Chidester was paid a nice hunk of cash to keep his mouth shut. That won't stymie the SEC investigation into the company's accounting, if it uses its subpoena powerto get Chidester to cough up what it knows.

One thing I wonder is whether the two local Salt Lake City newspapers will continue to ignore all this. Neither paid any attention to the Big Money article. I don't expect much from media outlets within clutching distance of Patrick Byrne, but it will be interesting to see if they continue to keep their readers ignorant of the sewer in their backyard.

UPDATE: Seth Jayson weighs in, with some choice comments on Byrne and his hired goon, the possible pederast and compulsive child-stalker Judd Bagley.

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About Me

I'm a journalist and author. My latest book is AYN RAND NATION: The Hidden Struggle for America's Soul (St. Martin's Press: Feb. 28, 2012). My previous books were Wall Street Versus America (Portfolio: 2006) and Born to Steal (Warner Books: 2003). I was an investigative reporter and Wall Street writer for BusinessWeek, a contributing editor at Condé Nast Portfolio, and have written for the Daily Beast, Parade magazine, Salon, The Street.com, Fortune.com, Barron's and many other publications. I was an adjunct professor at Columbia University's School of Journalism. Follow me on Twitter @gary_weiss Email: garyweiss dot email at gmail dot com